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Sustainable competitive advantage

Perspective
A wider view of
training effectiveness
Abstract
US business will spend more than $30 billion on training
this year. But will organizations get value for money?
Argues that the criteria against which training effective-
ness is measured should be changed to reflect the chang-
ing demands made on the training function.
Management Development Review
Volume 10 · Number 6/7 · 1997 · pp. 220–221
© MCB University Press · ISSN 0962-2519
220
Companies are cutting costs. Training, like
everything else, is on the hit list. But a firm’s
ability to learn faster than its competitors may
be its only sustainable competitive advantage.
Company restructuring and the speed of
change mean that workers must broaden their
skill base and be more thoroughly trained and
retrained throughout their working lives.
Motorola University, which began on a $2
million shoestring and a staff of three, now
spends more than $120 million a year. Yet
Motorola shies away from precise bottom line
evaluations of its training expenditure. It
simply declares that training has yielded $30
for every dollar invested, and saved more than
$3 billion in costs since 1967.
The company cites greater motivation,
higher quality, changed attitudes and more
open and honest communication as evidence
that training is working, but admits that proof
of its effect on company profits is harder to
find.
Andersen Consulting invests $280 million
a year in training for more than 38,000 people
worldwide. Each partner’s share of the bill is
$280,000 a year. To keep the partners con-
tributing, the company ensures that training is
consistent with clients’ needs, and remains in
tune with business realities.
Carmaker Saturn gives each of its 9,200
workers 90 hours a year of training. This
amounts to 5 per cent of their worktime.
Saturn attempts to find what difference train-
ing makes, even when the company cannot tie
training to the bottom line. The company
carries out a survey of workers before and
after training.
Federal Express goes so far as to test the
job knowledge of all 40,000 of its US couriers
and customer service agents by having them
plug into an interactive PC-based program
which asks questions specific to their individ-
ual assignments. The results play a key part in
their job evaluations.
Motorcycle maker Harley-Davidson also
offers evidence rather than proof of good
value from training expenditure. Says Richard
Teerlink, president and chief executive: “We
know training works when we do things
quicker and better. This is not rocket sci-
ence.”
The company gets products to market
faster by training design and manufacturing
teams in a technique called failure mode and
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A wider view of training effectiveness
Author/s
effect analysis. The company answers three
questions: what could go wrong, what is the
probability that it will go wrong and what
would happen to the product if it did go
wrong? The analysis allows the company’s
teams to make design changes which avert
these failures.
Employees at US memory-chip maker
Intel are similarly expected to apply their
training on the job to produce results. The
company’s $250 million training investment
accounts for 5.7 per cent of the payroll. Most
of Intel’s training is done by employee volun-
teers. Senior managers are encouraged to put
in a minimum of four days a year as classroom
instructors. Teaching is a component of exec-
utive bonuses.
Training is only one factor among many
At Johnson & Johnson, line managers tell the
training department what they want training
to accomplish, and the training department
explains what training can be expected to
contribute toward these objectives. The train-
ing department makes clear that training plays
a role, but that other factors are also involved.
If traditional bottom line accountability
eludes training, the reason may be that the
nature of training, like that of work, has
changed. In addition to its original purpose of
building skills, training now also helps to
build teams, change cultures and communi-
cate company values. Training also has a role
in the selection of people. The kind of infor-
221
Management Development Review
Volume 10 · Number 6/7 · 1997 · 220–221
mation which has to be learned can dictate the
kind of person being hired.
US insurance company Allstate is linking
education more closely to human resource
decisions about compensation and succes-
sion. Training at Banc One Corp., a large
bank holding company based in Columbus,
Ohio, is about selection and succession as well
as skills. The company judges the kinds of
thing it will have to prepare for in the future,
then finds and trains the people who will
acquire the skills most efficiently.
Training’s overall effect on the company
As training changes to meet the needs of
today’s environment, evaluation of training is
also changing. The question of strict financial
accountability is losing its relevance. If bot-
tom line proof of training effectiveness is hard
to get, look for the evidence of training’s
overall impact on the company.
It is difficult to argue against the need for
effective training in today’s reengineered,
downsized, globalized, technologically
advanced economy, where useful knowledge
has the half-life of a chocolate bar in a nurs-
ery. Is it too simplistic to say that if training
feels like the right thing to do, it probably is
the right thing to do?
This is a précis of an article entitled “Does training
pay off?” which was originally published in Across
the Board, June 1996, pp. 16-20. The author was
Steve Blickstein.